OPERATIONS MANAGEMENT

CHAPTER 9 - MANAGEMENT OF QUALITY

9.1 Introduction

● Quality is defined as the ability of a product or service to consistently meet or exceed

customer requirements or specifications.

● Over time, the importance of quality has decreased, but there is a recent upsurge of the
need of quality due to recent experience with costs and adverse publicity associated with
product recalls.

9.2 The Evolution of Quality Management

● Before the Industrial Revolution, all stages of production were performed by skilled
craftsmen, where pride of workmanship and reputation was used to determine whether a
job was done excellently.
○ Imagine a small municipality where there is a very popular tailor. The people
know that this tailor produces high-quality articles of clothing, so they are very
confident in this tailor’s skills to meet their quality expectations. This is pride of
workmanship and reputation at play.

● During the Industrial Revolution, the concept of the division of labor was
implemented, and only a smaller portion of the product was worked on by the workers.
Pride of workmanship became meaningful, but inspection was either nonexistent or
haphazard.

● Frederick W. Taylor, the father of Scientific Management, introduced product

inspection and gauging in his list of fundamental areas of manufacturing management.

● In 1924, Bell Telephone Laboratories introduced statistical control charts that could be
used to monitor production.

● Around 1930, Harold F. Dodge and Harry G. Romig from Bell Labs introduced tables
for sampling.

● The World War II caused a dramatic rise in emphasis on quality control, where the U.S.
Army refined sampling techniques for dealing with large shipments of arms from many
suppliers.
● Nearing the end of the 1940s, the U.S. Army, Bell Labs, and major universities trained
engineers in other industries on the use of statistical sampling techniques. Concurrently,
 professional organizations that focus on quality emerged throughout the country, such as
the American Society for Quality Control.

● During the 1950s, quality management evolved into quality assurance, where total
quality control efforts increased the scope of quality efforts from a focus on
manufacturing to include product design and incoming raw materials. Upper management
became more involved.

● During the 1960s, the zero defects concept became popular, focusing on employee
motivation and awareness and the expectation of perfection from each.

● In the 1970s, quality assurance methods gained increasing emphasis in services.

● Additionally, during the 1970s, the Organization of Petroleum Exporting Countries

introduced an embargo on oil sales, causing a rising interest in fuel-efficient, lower-cost
vehicles, and the Japanese automobile manufacturers were able to capture a large share of
the market because of this.

● Between late 1970s and 1980s, efforts were made by American producers to improve
quality and lower costs due to their loss of the market share.

● In the late 1970s, strategic approach to quality was introduced, where the focus was on
finding and correcting defective products before they reached the market. Customer
satisfaction was also more emphasized.

9.3 The Foundations of Modern Quality MAnagement: The Gurus

● Walter Shewart - Genuine pioneer in quality control, father of statistical quality control,
developed control charts to analyze the output of processes to determine when corrective
action was necessary, had strong influence on the thinking of W. Edwards Deming and
Joseph Juran.
● W. Edwards Deming - Compiled a famous list of 14 points that were the prescription
needed to achieve quality in an organization, emphasizing that the cause of inefficiency
and poor quality is the system, not the employees. The 14 points are shown below:
○ Create constancy of purpose toward improvement of product and service.
○ Reduce levels of delays, mistakes, defective materials, and defective
workmanship.
○ Cease dependence on mass inspection (Prevent defects rather than detect defects).
○ Eliminate suppliers that cannot qualify with statistical evidence of quality.
○ Find problems. It is management’s job to work continually on system
improvement.
 ○ Institute modern methods of training on the job.
○ Emphasize quality instead of volume alone. Management must prepare to take
immediate action on reports from foremen concerning barriers, such as inherent
defects, machines not maintained, poor tools, and fuzzy operational definitions.
○ Drive out fear, so that everyone may work effectively for the company.
○ Break down barriers between departments. People in research, design, sales, and
production must work as a team.
○ Eliminate goals and slogans asking for new levels of productivity without
providing methods.
○ Eliminate work standards that prescribe numerical quotas.
○ Remove barriers that stand between the hourly worker and his right to pride of
workmanship.
○ Institute a vigorous program of education and retraining.
○ Create a structure in top management that will push every day on the above 13
points.
● Joseph M. Juran - Taught Japanese manufacturers how to improve the quality of their
goods, believed that 80% of quality defects are management-controllable, described
quality management as a trilogy, consisting of quality planning, quality control, and
quality improvement.
○ Quality planning - establish processes capable of meeting quality standards
○ Quality control - know when corrective action is needed
○ Quality improvement - find better ways of doing things.
● Armand Feigenbaum - Advancing the approach of the cost of nonconformance as a
reason for management to commit to quality.
● Philip B. Crosby - developed zero defects concept and popularized the phrase, “Do it
right the first time,” he stressed prevention and argued against the idea that there will
always be some level of defectives.
● Kaoru Ishikawa - Developed the cause-and-effect diagram (also known as the fishbone
diagram) for problem-solving and the implementation of quality circles, involving
workers in quality improvement. He was the first quality expert to call attention to the
internal customer (the next person in process, the next operation).
● Genichi Taguchi - known for the Taguchi loss function which involves a formula for
determining the cost of poor quality. The idea is that deviation of a part from a standards
causes a loss, and the combined effect if deviations of all parts from their standards can
be large.
● Taiichi Ohno and Shigeo Shingo - both developed the philosophy and methods of
kaizen, a Japanese term for continuous improvement at Toyota.

9.4 Insights on Quality Management

Quality
- It is the degree to which performance of a product or service meets and exceeds customer
expectations.

Difference between Performance and Expectations

- If these two measures are EQUAL, the difference is ZERO
- If the difference is POSITIVE, performance has exceeded customer expectation

Customer Expectations
- Customers can judge the product through the quality or service

Product Quality (it is often judged on 9 dimensions of quality)

1. Performance - main characteristic of the product
2. Aesthetics - appearance, feel, smell, taste
3. Special Features - extra characteristics
4. Conformance - how well a product corresponds to design specifications
5. Reliability - dependable performance
6. Durability - ability to perform over time
7. Perceived quality - indirect evaluation of quality
8. Serviceability - handling of complaints or repairs
9. Consistency - quality does not vary

Service Quality
- the dimensions of Product Quality don't adequately describe Service Quality.
1. Convenience - the AVAILABILITY and ACCESSIBILITY of the service
2. Reliability - the ability to perform a service DEPENDABLY, CONSISTENTLY, and
ACCURATELY
3. Responsiveness - the WILLINGNESS of service providers to help customers to deal with
problems
4. Time - the SPEED with which service is delivered
5. Assurance - the knowledge exhibited by personnel who come into contact with customer; their
ability to convey TRUST and CONFIDENCE
6. Courtesy - the way customers are TREATED by employees
7. Tangibles - the physical appearance of facilities, equipment, personnel and communication
materials
8. Consistency - the ability to provide the same level of good quality repeatedly
9. Expectations - MEET or EXCEED customers expectations

The dimensions of both product and service quality establish a conceptual framework for
thinking about quality, but they are too abstract to be applied operationally for purposes of
product or service design. They must be stated in terms of SPECIFIC, MEASURABLE
characteristics.
Assessing Service Quality

Servqual
- A widely used tool for assessing service quality
- An instrument designed to obtain feedback on an organization's ability to provide quality
service to customers.
- It focuses on the 5 service dimensions that influence customers' perceptions of service quality
(Tangibles, Reliability, Responsiveness, Assurance, Empathy)

Gaps / Discrepancies in Service Quality

There may be discrepancies between:
1. Actual customer expectations and Management perceptions of those expectations
2. Management perceptions of customer expectations and Service-Quality specifications
3. Service quality and Service actually delivered
4. Service actually delivered and What is communicated about the service to customers
5. Customers' expectations of the service provider and Their perceptions of provider delivery

If gaps are found, they can be related to tangibles or other service quality dimensions to address
the discrepancies.

The 4 Determinants of Quality

1. Design
2. How well the product or service conforms to the design
3. Ease to use
4. Service after delivery

Design
- It is the starting point for the level of quality eventually achieved. It involves decisions about
the specific characteristics of a product or service such as a size, shape and location.

Quality of Design - it refers to the intention of designers to include or exclude certain features in
a product or service.

Quality of Conformance - it refers to the degree to which goods and services conform to the
intent of the designers.

Ease of Use - this increase the chances but do not guarantee that a product will be used for its
intended purposes and in such a way that it will continue to function properly and safely.

Responsibility for Quality

Key Areas:

> Top Management - it must institute programs to improve quality; guide, direct and motivate
managers and workers, and set an example by being involved in quality initiatives.

ex. Taking training in quality, issuing periodic reports on quality, attending meetings on quality

> Design - Quality products and Services begin here; includes attention to the processes that will
be required to produce the products and services that will be required to deliver the service to
customers.

> Procurement - it has the responsibility for obtaining goods and services that will not detract
from the quality of the organization's goods and services.

> Production / Operations

- it has the responsibility to ensure that processes yield products and services that conform to
design specifications.
- monitoring processes, finding and correcting root causes of problems are important aspects

> Quality Assurance - it is responsible for gathering and analyzing data on problems and
working with operations to solve problems.

> Packaging and Shipping - this ensures that goods are nor damaged in transit that packages are
clearly labeled, that instructions are included, that all parts are included and that shipping occurs
in a timely manner.

> Marketing and Sales - this department has the responsibility to determine customer needs and
to communicate them to appropriate areas of the organization; also they are responsible to report
any problems with product or services.

> Customer Services

- This department is often the first to learn of problems
- It has the responsibility to communicate the problem to appropriate departments to deal with it
in a reasonable manner.

The Consequences of Poor Quality

- Some of the major areas affected by quality are:
1. Loss of Business - Poor designs or defective products or services can result to this.
2. Liability - this costs can often be substantial, especially if large numbers of items are
involved.
3. Productivity - if parts are defective and have to be reworked or if an assembler has to try a
number of parts before finding one that fits perfectly.
4. Costs - the earlier a problem is identified in the process, the cheaper the cost to fix it.

The Cost of Quality

- Any serious attempt to deal with quality issues must take into account the costs associated with
quality.

3 Categories:
1. Appraisal Cost - costs of activities designed to ensure quality or uncover defects.
2. Prevention Cost - costs of preventing defects from occurring.
3. Failure Cost - costs caused by defective parts or products or by faulty services. ( 2 types of
Failure - Internal and External)
> Internal Failure - failures discovered DURING production
> External Failure - failures discovered AFTER DELIVERY to the customer

Ethics and Quality Management

> Substandard Work
- Defective Products
- Substandard Service
- Poor Design
- Shoddy Workmanship
- Substandard parts and materials

Having knowledge of this and failing to correct and report it in a timely manner is unethical.
9.5 Quality Awards

> The Baldrige Award

- named after Malcolm Baldrige, an industrialist and former secretary of commerce.
- First presented in 1988
- This award is administered by the National Institute of Standards and Technology.
- Its purpose is to stimulate efforts to improve quality to recognize quality achievements and to
publicize successful programs.
The Baldrige Criteria:
1. Leadership
2. Strategic Planning
3. Customer and Market Focus
4. Information and Analysis
5. Human Resource Focus
6. Process Management
7. Business Results
> The European Quality Award
- Europe's most prestigious award for organizational excellence.

> The Deming Prize

- named in honor of the late W. Edwards Deming
- Japan's highly coveted awards recognizing successful quality efforts
- It is given annually to any company that meets the standards
- It's main focus on statistical quality control

9.6 QUALITY CERTIFICATION

Many business firms who operate internationally give importance to quality certification. The
International Organization for Standardization (ISO) promotes worldwide standards for the
improvement of quality, productivity, and operating efficiency through a series of standards and
guidelines.

ISO 9000 - These are set of international standards on quality management and quality
assurance, which are critical to international businesses.

Requirements:
- System requirements
- Management
- Resource
- Realization
- Remedial

Quality Management Principles:

- Customer focus
- Leadership
- Involvement of people
- Process approach
- Systems approach to management
- Continual improvement
- Factual approach to decision making
- Mutually beneficial supplier relationships

ISO 14000 – These are set of international standards for assessing a company’s environmental
performance.

Standards in 3 major areas:

- Management systems – systems development and integration of environmental responsibilities
into business planning.
- Operations – consumption of natural resources and energy.
- Environmental systems – measuring, assessing, and managing emissions, effluents, and other
waste.

ISO 24700 – These are set of international standards which pertains to the quality and
performance of office equipment that contains reused components.

9.7 QUALITY AND SUPPLY CHAIN

· Business leaders are increasingly recognizing the importance of their supply chain in
achieving their quality goals.
· When dealing with supplier quality in a global scale, developed countries often have a fair
level of sophistication concerning quality awareness.
· Less-developed countries have little or no awareness of modern quality practices which poses
great liability for companies who outsource to those areas.
· Outsourcing in the pharmaceutical industry may lower the costs to importers, but it also
increases their liability risk.
· Risk comes from the use of substandard materials or work methods, which leads to inferior
product quality and potential product liability.
· The emphasis in supply chain quality management is on reducing outsourcing risk as well as
product or service variation and overhead.
· Tighter control of vendors and worker training can reduce risks.
· Through statistic quality control, variation results from processes that are not in control can be
reduced.
· Overhead can be reduced by assigning quality assurance responsibility to vendors.
· Supply chain quality management can benefit from a collaborative relationship with
suppliers.

9.8 Total Quality Management

Total Quality Management- a philosophy that involves everyone in an organization in a

continual effort to improve quality and achieve customer satisfaction.

3 Philosophies to TQM approach

1. Continuous Improvement
2. Involvement of everyone in the organization
3. Customer Satisfaction

TQM Approach
1. Find out what customer wants
2. Design a product or service that will meet (or exceed) what a customer want
3. Design processes that facilitate doing the job right the first time
4. Keep track of results, and use them to guide improvement in the system
5. Extend these concepts throughout the supply chain
6. Top management must be involved and committed

Elements of TQM
1. Continuous improvement
2. Competitive benchmarking
3. Employee empowerment
4. Team approach
5. Decisions based on facts other than opinions
6. Knowledge of tools
7. Supplier quality
8. Champion
9. Quality at the source
10. Suppliers

Obstacles to implementing TQM

1. Lack of company wide definition of quality
2. Lack of strategic plan for change
3. Lack of customer focus
4. Poor intra organizational communication
5. Lack of employee empowerment
6. View of quality as a “quick fix”
7. Emphasis on short-term financial results
8. Inordinate presence of internal politics and “turf” issues
9. Lack of strong motivation
10. Lack of time to devote to quality initiatives
11. Lack of leadership

Criticisms of TQM
1. Pursuing TQM programs blindly
2. Programs may not be linked to strategies
3. Quality-related decisions may not be tied to market performance
4. Failure to carefully plan a program
5. Organizations sometimes pursue continuos improvement when dramatic improvements are
needed
6. Quality efforts may not be tied to results
9.9 Problems Solving and Process Improvements

Plan-do-study-act (PDSA) cycle also referred to as either Shewhart cycle or Deming wheel, is
the conceptual basis for problem solving activities.

Process improvement- is a systematic approach to improving a process. It involves

documentation, measurement, and analysis for the purpose of improving the functioning of a
process. Typical goals of process improvement include increasing customer satisfaction,
achieving higher quality, reducing waste, reducing cost, increasing productivity, and reducing
processing time.

Basic steps in Problem Solving

1. Define the problem and establish an improvement goal
2. Develop performance measures and collect data
3. Analyze the problem
4. Generate potential solutions
5. Choose a solution
6. Implement the solution
7. Monitor the solution to see if it accomplishes the goal

Overview Of Process Improvement

A.Map the Process
1.Collect information about the process, identify each step in the process.
2.Prepare a flowchart that accurately depicts the process.
B.Analyze the Process
C.Redesign the Process
Using the results of the analysis, redesign the process.

Six Sigma

•Statistically means having no more than 3.4 defects per million opportunities in any process,
product, or service.
•Conceptually means referring to a program designed to reduce the occurrence of defects to
achieve lower costs and improved customer satisfaction.
•Six Sigma Programs have become a key to improve quality, save time, cut costs, and improved
customer satisfaction. It can be employed in design, production, service, inventory management,
and delivery.
Six Sigma Management
•Strong Leadership
•Defining Performance Metrics
•Selecting Projects likely to achieve business results
•Selecting and training appropriate people

Six Sigma Technical

•Improving Process Performance
•Reducing Variation
•Utilizing Statistical Methods
•Designing a structured improvement strategy

Six Sigma Team

Top Management- formulate and communicate the company’s overall objective and lead the
program for successful deployment.
Program Champions- identify and rank potential projects, help select and evaluate candidates,
manage program resources, and serve as advocates for the program.
Master black belts- have extensive training in statistics and use of quality tools. They are
teachers and mentors of black belts.
Black Belts- are projects team leaders responsible for implementing process improvement
projects.
Green Belts- are member of the project team

Six Sigma Principles

1. Reduction of variation is an important goal
2. The methodology is data driven
3. Outputs are determined by inputs
4. Only a critical few of inputs have significant effect on outputs

DMAIC (define-measure-analyze-improve-control) - is a formalized problem-solving process of

Sigma.

5 Steps of Sigma (DMAIC)

1. Define
2. Measure
3. Analyze
4. Improve
5. Control

9.10 Quality Tools

 There are a number of tools that an organization can use for problem solving and process
improvement.

1. A Flowchart is a visual representation of a process. As a problem solving tool, a flowchart

can help investigators in identifying possible points in a process where problems occur.

2. A Check sheet is a simple tool for recording and organizing data to identify a problem. It
provides a format that enables users to record and organize data in a way that facilitates
collection and analysis.

3. An Histogram is a chart of an empirical frequency distribution.

4. A Pareto Analysis is a technique for classifying problem areas according to degree of

importance, and focusing on the most important.

5. A Scatter Diagram is a graph that shows the degree and direction of relationship between
two variables.

6. A Control Chart is a statistical chart of time-ordered values of a sample statistic.

7. A Cause-and-effect Diagram is a diagram used to search for the cause(s) of a problem, also
called fishbone diagram.

8. A Run Chart is a tool used for tracking results over a period of time.

Some additional tools that are useful for problem solving and/or process improvement are
brainstorming, quality circles, and benchmarking.

- Brainstorming is a technique for generating a free flow of ideas in a group of people.

- Quality circles are groups of workers who meet to discuss ways of improving products or
processes.
- Benchmarking is a process of measuring performance against the best in the same or another
industry.

9.11 Operations Strategy

- All customers are concerned with the quality of goods and services they receive.

- Business organizations have a vital, strategic interest in achieving and maintaining high
quality standards.
- There is a positive link between quality and productivity.

- The best business organizations view quality as a never-ending journey.

- The top down approach happens when the top management needs to be visibly involved and
needs to be supportive, both financially and emotionally.

- Education of the managers and workers regarding the concepts, tools, and procedures of
quality are important.

- Customer satisfaction does not always guarantee customer loyalty.

- Problems such as defects in purchased parts, long lead times, and late or missed deliveries of
goods or services all negatively impact an organization’s ability to satisfy its customers.

- The consequences of poor quality includes loss of market share, liability claims, a decrease in
productivity, and an increase in costs.

- Determinants of quality are design, conformance to design, ease of use, and service after
delivery.

- Modern quality management is directed at preventing mistakes rather than finding them after
they occur and reducing process output variation.

- Three awards of distinction—the Baldrige Award, the European Quality Award, and the
Deming Prize—are given annually to organizations that have shown great achievement in
quality management.

- Total quality management is a never-ending pursuit of quality that involves everyone in an

organization. Its driving force is customer satisfaction and the key philosophy is continuous
improvement.

- Two major aspects of the TQM approach are problem solving and process improvement.

- Six-Sigma programs are a form of TQM. They emphasize the use of statistical and
management science tools on selected projects to achieve business results.